Air Europa's stingy salary
The Spanish airline has a great job going, but why is the salary so low?
Spanish airline Air Europa has a great job going in London right now. At least it would be great, except for one thing. The salary of the desired Sales & Marketing Executive – GBP 28,000 (USD 35,200) – is almost exactly equal to the London living wage (GBP 13.15 per hour).
Based on an eight hour day (9-5) that pay is 2.1% over the living wage. Based on an eight and a half hour day (9-5.30), more usual in London, the pay is 3.9% under the living wage.
For readers who do not live in London, I should place this all in context. The living wage is not the minimum wage exactly. Employers can legally pay less (GBP 25,282 for a 9-5.30 day). But it is the absolute minimum viable wage. Anything less is challenging to live on.
It is certainly not the “market” rate – according to Statista the median annual earnings for full time employees in London is GBP 44,370, 58% more than Air Europa is offering.
To be honest I was shocked. Air Europa’s proposed salary is shameful for an airline in London. The advertised travel benefits are meaningless – absent a high-earning partner, nobody on this wage will be able to afford a holiday.
London is an expensive place and City Hall defines the living wage as “calculated independently to reflect the high cost of living in the capital, giving a worker in London and their family enough to afford the essentials and to save.”
Covering essentials and a bit of saving, Air Europa is hardly being generous with this salary. I decided to find out why and there are two possibilities:
1. Either Air Europa is being mean and the new Sales Executive is not getting their fair share; or
2. The salary is a fair share, but Air Europa is doing a bad job of capitalising on the value of the London market and could do better.
Neither are great for Air Europa.
So let’s investigate…
Here is a screen shot of the job advert:
At the time of writing it is online here.
First of all, let’s see what makes it a great job:
1. Reporting to an experienced senior manager – Head of Sales, check
2. Interesting work covering sales & marketing – check
3. Good opportunity to develop soft sales skills – check
4. Chance to learn about travel data & analysis – check.
They are asking for a lot:
1. Degree + fluency in Spanish & English
2. Negotiation & organisational skills
3. Competence in Excel & social media
4. Knowledge of UK and Latin American travel markets.
In other words, this is not an entry level position. Yet more than 50% of people in London are earning 58% more. Are Air Europa realistically going to get the candidate they are asking for AND a spot of sales pazazz? No chance.
Now let’s ask why is the salary too low – is the Sales Executive not getting their fair share or is the airline doing a bad job of monetising the market?
To answer this, let’s investigate Air Europa’s network and commercial product.
Based on mid-June’s schedule, week of 16- to 22-Jun-2024, Air Europa has two single-aisle Boeing 737s flying between Madrid and London Gatwick every day. There do not appear to be any other flights in the week.
Seat maps show that each aircraft can carry up to 16 biz-class and 168 economy passengers. Which means that up to 448 biz-class and 4,704 economy class passengers a week can fly to and from London.
The sales team will not be responsible for all of them. As a major city, London will have both outbound and inbound travel. The new Sales Executive will be responsible for a portion of outbound.
Their network is divided into three parts.
First consider the map below, generated by the excellent Great Circle Mapper. The circle shows a 500 mile radius at Madrid. Everything north and east of this circle is almost irrelevant for the London market – hardly anybody will fly to Zurich or Rome via Madrid.
Passengers from the north and east, including London will however be connecting in Madrid. Some will go inside the circle and others will go south to Morocco and the Canary Islands.
But many others will connect to the impressive longhaul network, which is summarised in the map and table below.
Guayaquil in Ecuador (GYE) is a triangle on four out of five days of the week, with flights heading from Madrid to Quito (UIO), on to Guayaquil and then back to Madrid.
London alone with it’s 448 biz and 4,704 economy seats each week is clearly going to make a small contribution to the network. So it is time to start making some reasonable assumptions for our modelling…
Reasonable assumption 1: Half of all seats on the London flights are sold by the London sales team and the other half are sold into London by sales teams in other countries.
The network is well designed, with universal connectivity from London summarised in the graph below.
Source: flight schedules, week of 16- to 22-Jun-2024, Oliver Ranson’s analysis
The chart at the top shows flights arriving from London into Madrid (the light blue bars) and flights leaving Madrid for the Americas (the dark blue bars). There are two departures banks westbound from Madrid, one in the afternoon and one late at night. The average connection times are good, 2:08 for the afternoon bank and 4:23 for the night bank.
The chart at the bottom shows flights arriving in Madrid from the Americas (the dark orange bars) and flights leaving Madrid for London (the light orange bars). There are two arrivals banks into Madrid, one at dawn and one at mid-day. The average connection times are good, 2:29 for the dawn bank and 2:50 for the mid-day bank.
All things considered, Air Europa has an excellent connecting product.
Now let’s estimate how many seats on each of the longhaul flights are sold out of London.
The table below shows that of all the routes north and east of the circle in the first map, London offers 8.5% of biz-class and 8.2% of economy class capacity connecting to the westbound afternoon bank. The figures for the night bank, the dawn arrivals bank and the mid-day arrivals bank respectively are 7.1%, 7.8% and 7.5% for biz-class and 7.0%, 7.7% and 7.3% for economy.
Because of reasonable assumption 1, in this model the London sales office are responsible for half of these, less passengers originating, terminating or turning around in Madrid.
Reasonable assumption 2: Assuming an 85% seat factor on all flights and in accordance with the table above, London sales achieves the intercontinental sales volumes shown in the table below.
Reasonable assumption 3: London sells intercontinental flights to their share of the 85% seat factor, and then sells 85% of the remaining seats to Madrid – this makes sense from a revenue management perspective as the revenue optimiser is unlikely to sell a seat to a Madrid-bound passenger if it expects a higher yield intercontinental passenger to buy the seat instead. As a result, London sales achieves the Madrid sales volumes shown in the table below.
Reasonable assumption 4: London sales sells at yields such that at the mean fare in each revenue booking designator (RBD), each RBD contributes the same amount to revenue (as used in a demonstration for another airline in this article), so the one way average ticket values and overall revenue contribution for London is as shown in the table below. These include YQ carrier surcharge.
The table shows that Air Europa’s estimated weekly revenue budget from London is GBP 947k million, of which GBP 210k (22.2%) is biz-class. Annually that would be GBP 49.4 million.
How much of that could the sales team be responsible for? Of course it is hard to tell exactly, but let’s go with the famous 80-20 split model on the grounds that lots of people will book Air Europa anyway through it’s booking engines and online travel agency presence. This suggests that London Sales could reasonably be directly generating around 20% of Air Europa’s sales, GBP 9.9 million income annually.
This article from 2017 is a bit old, but it gives some insights into the sales team at Air Europa’s London office.
According to the article they have at least one Sales Executive, at least one Head of Sales and at least one UK Director. Three people with an GBP 49.4 million revenue budget and perhaps around GBP 9.9 million of directly attributable revenue. That’s more than three million Pounds each.
Even if they had 30 people on the team each person would still be generating six figures in income.
Given the circumstances, an airline with a well designed network product for sale in a wealthy and prosperous market, GBP 28k is mean. Just 1% of value added. Even doubled it would still be mean. Even if my numbers are way out the airline is still mean.
So if they are not paying Sales staff (like it or not and you can say what you like about paying IT, HR and the rest, but Sales is directly generating the cash), who are they paying? Consultants and vendors most likely.
In a few months from now the new Sales & Marketing Executive will be sitting in their shared house (shared room?) wondering what they can afford to eat for dinner. Meanwhile on that very same evening a few miles away, the lot from the big suppliers whose names we all know will be munching on sashimi in Mayfair and downing trebles all round in Soho. Part paid for with money that should be given to the new Sales Exec and others like them.
Now I am red in tooth and claw commercially speaking, but this is messed up. The person in Air Europa’s head office management team who approved this salary band must be crazy. Air Europa can and should do better for their staff.
oliver AT ransonpricing DOT com